Question 1

Economics is probably best defined as the study of unintended consequences.

Accepted Answer

A) True 
 B)False

Question 2

Economists use the term _____ to emphasize the point that people do not have perfect knowledge or perfect insight.

Accepted Answer

A) fallacy of composition 
B) rational self-interest 
C) cold call 
D) cognitive bias 
E) bounded rationality 
A) fallacy of composition 
B) rational self-interest 
C) cold call 
D) cognitive bias 
E) bounded rationality

Question 3

When people make choices that (at the time and with the information they have at their disposal)give them the greatest amount of satisfaction, they are said to be:

Accepted Answer

A) behaving irrationally. 
B) applying econometric models to their everyday behavior. 
C) living under a communist dictator. 
D) acting in their own rational self-interest. 
E) showing no willingness to plan for the future. 
A) behaving irrationally. 
B) applying econometric models to their everyday behavior. 
C) living under a communist dictator. 
D) acting in their own rational self-interest. 
E) showing no willingness to plan for the future.

Question 4

The statement, "All Americans should be entitled to public health care, " made by a politician would be considered a:

Accepted Answer

A) positive statement. 
B) macroeconomic statement. 
C) microeconomic statement. 
D) normative statement. 
E) model. 
A) positive statement. 
B) macroeconomic statement. 
C) microeconomic statement. 
D) normative statement. 
E) model.

Question 5

A haircut at an upscale beauty salon would be regarded as a good in economics.

Accepted Answer

A) True 
 B)False

Question 6

"The Super Bowl on January 28, 2001, was won by the Baltimore Ravens.Since the Ravens were originally from Cleveland and are part of the old NFL, the stock market is expected to decline in 2001." This statement is an example of:

Accepted Answer

A) the interpretation of association as causation. 
B) ceteris paribus ("everything else held constant"), analysis. 
C) rational behavior. 
D) the fallacy of composition. 
E) marginal analysis. 
A) the interpretation of association as causation. 
B) ceteris paribus ("everything else held constant"), analysis. 
C) rational behavior. 
D) the fallacy of composition. 
E) marginal analysis.

Question 7

Which of the following resources will not be considered as land?

Accepted Answer

A) Minerals 
B) Timber 
C) Water 
D) Fertile soil 
E) Processed cotton fibre 
A) Minerals 
B) Timber 
C) Water 
D) Fertile soil 
E) Processed cotton fibre

Question 8

People can increase their wealth by:

Accepted Answer

A) increasing the value of the resources they own. 
B) selling the land they own. 
C) investing in risky ventures. 
D) purchasing shares of stock. 
E) trading bonds they own for stocks. 
A) increasing the value of the resources they own. 
B) selling the land they own. 
C) investing in risky ventures. 
D) purchasing shares of stock. 
E) trading bonds they own for stocks.

Question 9

"Since a household cannot afford to keep adding indefinitely to its debt, a country cannot afford to do so either." This statement is an example of:

Accepted Answer

A) interpretation of association as causation. 
B) ceteris paribus ("everything else held constant")analysis. 
C) rational behavior. 
D) the fallacy of composition. 
E) marginal analysis. 
A) interpretation of association as causation. 
B) ceteris paribus ("everything else held constant")analysis. 
C) rational behavior. 
D) the fallacy of composition. 
E) marginal analysis.

Question 10

A(n)_____ is anything that you would pay to get rid of.

Accepted Answer

A) economic good 
B) economic bad 
C) resource 
D) free good 
E) public good 
A) economic good 
B) economic bad 
C) resource 
D) free good 
E) public good

Question 11

Which of the following trends has been observed in the U.S.with respect to higher education?

Accepted Answer

A) Students from less educated families stand a better chance of getting admitted to colleges. 
B) The divorce rate for college grads is twice as high as that of high school grads. 
C) The divorce rates for college grads are accelerating every year. 
D) High school grads are twice as likely to smoke as college grads. 
E) College grads are likely to live shorter and less healthy lives than high school grads. 
A) Students from less educated families stand a better chance of getting admitted to colleges. 
B) The divorce rate for college grads is twice as high as that of high school grads. 
C) The divorce rates for college grads are accelerating every year. 
D) High school grads are twice as likely to smoke as college grads. 
E) College grads are likely to live shorter and less healthy lives than high school grads.

Question 12

Which of the following statements is in the realm of positive economics?

Accepted Answer

A) The president should propose a tax cut because taxes are too high. 
B) Studies show that if taxes are cut, unemployment falls. 
C) The budget deficit is too high and should be lowered. 
D) Studies show that a national debt of over a trillion dollars is bad for the country and should not be allowed to occur. 
E) The share of defense spending in the budget ought to be changed. 
A) The president should propose a tax cut because taxes are too high. 
B) Studies show that if taxes are cut, unemployment falls. 
C) The budget deficit is too high and should be lowered. 
D) Studies show that a national debt of over a trillion dollars is bad for the country and should not be allowed to occur. 
E) The share of defense spending in the budget ought to be changed.

Question 13

People who choose not to wear seat belts even after being aware that it reduces the probability of death in an accident are considered to be irrational by economists.

Accepted Answer

A) True 
 B)False

Question 14

Identify the correct statement.

Accepted Answer

A) Positive economics deals with what ought to be. 
B) Positive economics is subjective. 
C) Normative economics is objective. 
D) Normative economics deals with what is. 
E) Normative economics expresses someone's opinion 
A) Positive economics deals with what ought to be. 
B) Positive economics is subjective. 
C) Normative economics is objective. 
D) Normative economics deals with what is. 
E) Normative economics expresses someone's opinion

Question 15

The common logical mistake of interpreting association as causation:

Accepted Answer

A) never occurs in the real world. 
B) is another term for the fallacy of composition. 
C) occurs when unrelated or coincidental events that occur at about the same time are said to have a cause-and-effect relationship. 
D) is the error of attributing what applies in the case of one to the case of many. 
E) occurs when one variable is closely associated with another variable. 
A) never occurs in the real world. 
B) is another term for the fallacy of composition. 
C) occurs when unrelated or coincidental events that occur at about the same time are said to have a cause-and-effect relationship. 
D) is the error of attributing what applies in the case of one to the case of many. 
E) occurs when one variable is closely associated with another variable.

Question 16

In its most fundamental sense, economics is the study of:

Accepted Answer

A) production and cost. 
B) supply and demand. 
C) scarcity and choice. 
D) specialization and trade. 
E) externality and public goods. 
A) production and cost. 
B) supply and demand. 
C) scarcity and choice. 
D) specialization and trade. 
E) externality and public goods.

Question 17

A rational consumer:

Accepted Answer

A) never makes mistakes. 
B) is also a successful entrepreneur. 
C) always has perfect information. 
D) never acts until he or she has perfect information 
E) seeks to gain the greatest possible satisfaction from purchases, using the available information. 
A) never makes mistakes. 
B) is also a successful entrepreneur. 
C) always has perfect information. 
D) never acts until he or she has perfect information 
E) seeks to gain the greatest possible satisfaction from purchases, using the available information.

Question 18

According to the U.S.Census Bureau, what is the difference between the earnings of a high school diploma holder and a medical practitioner between the ages of 25 and 64?

Accepted Answer

A) $3.2 million 
B) $1.2 million 
C) $5 million 
D) No wage disparity 
E) $8.5 million 
A) $3.2 million 
B) $1.2 million 
C) $5 million 
D) No wage disparity 
E) $8.5 million

Question 19

The statement "people have unlimited wants, " implies that people:

Accepted Answer

A) always want more goods/services than they can purchase with their incomes. 
B) always have a desire to hold liquid money. 
C) always strive to be the best they can be. 
D) generally desire for goods and services which they can afford out of their income. 
E) try to earn more and more money as their experience at work increases. 
A) always want more goods/services than they can purchase with their incomes. 
B) always have a desire to hold liquid money. 
C) always strive to be the best they can be. 
D) generally desire for goods and services which they can afford out of their income. 
E) try to earn more and more money as their experience at work increases.

Question 20

The term rational self-interest, as viewed by economists, means:

Accepted Answer

A) consumers would never pay more for a good simply because it carried a certain designer label. 
B) only economists are capable of making choices according to rational self-interest. 
C) people never act until they have perfect information in order to guarantee that they act in their own self-interest. 
D) consumers always seek the least expensive option when making a purchase, regardless of individual preferences. 
E) people will make the choices that, given the information available, will give them the greatest amount of satisfaction. 
A) consumers would never pay more for a good simply because it carried a certain designer label. 
B) only economists are capable of making choices according to rational self-interest. 
C) people never act until they have perfect information in order to guarantee that they act in their own self-interest. 
D) consumers always seek the least expensive option when making a purchase, regardless of individual preferences. 
E) people will make the choices that, given the information available, will give them the greatest amount of satisfaction.

Exam 1: Economics: The World Around You

Economics is probably best defined as the study of unintended consequences.

Economists use the term _____ to emphasize the point that people do not have perfect knowledge or perfect insight.

When people make choices that (at the time and with the information they have at their disposal)give them the greatest amount of satisfaction, they are said to be:

The statement, "All Americans should be entitled to public health care, " made by a politician would be considered a:

A haircut at an upscale beauty salon would be regarded as a good in economics.

"The Super Bowl on January 28, 2001, was won by the Baltimore Ravens.Since the Ravens were originally from Cleveland and are part of the old NFL, the stock market is expected to decline in 2001." This statement is an example of:

Which of the following resources will not be considered as land?

People can increase their wealth by:

"Since a household cannot afford to keep adding indefinitely to its debt, a country cannot afford to do so either." This statement is an example of:

A(n)_____ is anything that you would pay to get rid of.

Which of the following trends has been observed in the U.S.with respect to higher education?

Which of the following statements is in the realm of positive economics?

People who choose not to wear seat belts even after being aware that it reduces the probability of death in an accident are considered to be irrational by economists.

Identify the correct statement.

The common logical mistake of interpreting association as causation:

In its most fundamental sense, economics is the study of:

A rational consumer:

According to the U.S.Census Bureau, what is the difference between the earnings of a high school diploma holder and a medical practitioner between the ages of 25 and 64?

The statement "people have unlimited wants, " implies that people:

The term rational self-interest, as viewed by economists, means:

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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